This generation of pre-retirees hasn’t been trained to think much about what they’ll use for income when their paychecks go away.

Their parents had a pension they could depend on — a guaranteed monthly income they received through a defined-benefit plan that put any investment risk on the plan provider. But for most Baby Boomers, at some point during their working lives their employers began transitioning to defined-contribution plans, such as 401(k)s. Pensions are disappearing. And, in many cases, so has the matching employer contribution that initially made 401(k) plans seem so appealing.

Savers now shoulder all the worries, risks and fees that come with investing — and many are finding they’re far short of having enough to live on for what could be decades in retirement.

Advertisement

If more people made retirement income the main focus of their savings, they probably wouldn’t take as much risk. They’d likely be more aware of the fees they’re paying. And they’d be a little more possessive of the money in their accounts, rather than just leaving it to the whims of the stock market.

There are ways to help preserve the money you worked so hard for and to maybe create a more durable income in retirement. Here are four investment ideas to consider, given today’s market and economic challenges.

1. Dividends from blue-chip stocks.

Open your pantry and closets at home and look at what’s inside. Those goods come from big consumer staple companies — U.S.-based dividend-paying blue chips. Those are the companies that typically have more staying power than other companies. Consider investing in them, and use the dividends they pay as part of your retirement income. It is important to keep in mind that dividends aren’t always paid and that the stocks shouldn’t be purchased only for the dividends, however, dividends can provide some additional income.

Advertisement

A bond is similar to an IOU; you’re lending money to the issuer, in this case a corporation. In return for that money, that business promises to pay a specified rate of interest until the bond matures. Both preferred stocks and bonds can offer a degree of stability to your income plan. It’s important to be aware of how rising interest rates could affect this strategy, as well as keeping in mind that, as market-based products, these dividend-paying stocks will still be subject to the usual market volatility.

3. Alternatives to the stock market.

In the quest for diversification, don’t overlook alternatives to the stock market. There are many different opportunities, such as senior secured debt, private equity for higher net worth individuals and real estate that could help provide stability in retirement and durable income throughout.

One of the more common alternatives is real estate. A lot of people, though, don’t like the idea of being a landlord because they don’t want to be subjected to the three evil T’s: taxes, tenants and toilets. But you can put your money into different types of institutionally managed real estate (both publicly traded and privately held) without ever getting your hands dirty. There are certain sectors of real estate that make more sense than others if you want to reduce your risk. You probably want to avoid anything that’s discretionary, such as retail or leisure sites. If there’s a downturn or recession, those are usually the first to be cut. Focus, instead, on something that is more necessity-based: Class A or B multifamily housing, for example, real estate with a health care focus or grocery-anchored ventures.

4. Contractually guaranteed income.

If you’re one of those workers who never got a traditional pension through your employer, this is an opportunity to create a guaranteed and steady income stream for yourself. It’s no secret that when companies offer a pension to an employee, they may go to a large insurance company and purchase an annuity in that person’s name. If your company didn’t do that for you, you still can buy your own annuity and enjoy that steady income stream. However, not all annuities are created equal — before purchasing an annuity, it is important to consider many different companies, evaluate their solvency and ratings and compare the best interest rates or participation rates. Be wary of the high costs and market risk associated with variable annuities, but a fixed annuity or fixed-index annuity can provide you steady and reliable income without risk of losing your money due to outside market forces.

Advertisement

That old analogy of the three-legged stool of retirement savings — Social Security, your employee pension and personal savings — is getting pretty shaky. Pensions are withering, and politicians keep talking about reworking or even eliminating Social Security. Investors have to preserve what they’ve saved by investing wisely and reducing risk.

Wall Street has done a good job of convincing investors that the best way to make money is going forever long on the market — despite the ups and downs, the corrections and calamities. But that isn’t necessarily the best advice as you approach and enter retirement.

The savings you see on your account statements represent your ability to have the lifestyle you want in retirement. Don’t put off taking charge of your future.

Curvin E. Miller IV is vice president of Russell & Company Total Wealth Management. He is a Chartered Retirement Planning Counselor designee through the College of Financial Planning, has passed the Series 7 and 66 exams and is a licensed insurance professional. He was named one of the Top 18 Alumni from 2004 to 2013 by his alma mater, Miami University in Ohio. Miller co-hosts the weekly "Retirement Rescue Radio" show. He is a longtime swimmer and loves mountain biking.